October Lean Hogs traded in a neutral manner on Friday, consolidating within Thursday’s trading range. It revolved around the 83.325 key level, opening below it, rallying past it and then closing below it. The range was 84.025 high, 82.95 low and 83.125 settlement. The low was also just above support at the 13-DMA now at 82.925. The cash market continues to struggle with cutouts for Friday lower and cash market also lower for the day. The indices are grinding higher, but we are seeing some up and then down movements in the cash markets. Slaughter jumped at the end of the week to overtake last year’s slaughter pace and with weights rebounding, we could see a big jump in production. With last week’s exports weak, we need to see foreign demand come back and US demand improve. With cattle markets super strong, you have to wonder if the Prop 12 issues are weighing on the hog market as producers and consumers grapple with changing dynamics. This is with the law not fully implemented. What will happen when it is in full bloom. Producers do not want to make changes, in my opinion due to the uncertainty in the consumer end. Will Congress pass a law negating one states influence over another state’s production methods. Something has to give! A failure below the 13-DMA could lead to a test of the rising 21-DMA now at 81.90. Then comes the nearby 81.70 support level. Support then comes in at 80.45. If Hogs can retake the 83.325 resistance level, it could test the Friday high. A rally past resistance at the Friday high will face resistance at the declining 50-DMA now at 84.525. Resistance then comes in at 85.325.
The Pork Cutout Index increased and is at 99.33 as of 9/14/2023.
The Lean Hog Index increased and is at 86.94 as of 9/13/2023.
Estimated Slaughter for Friday is 476,000, which is above last week’s 474,000 and last year’s 473,000. Saturday’s slaughter is expected to be 150,000, which is below last week’s 348,000 and above last year’s 85,000. The estimated slaughter for the week (so far) is 2,531,000, which is above last week’s 2,234,000 and last year’s 2,486,000.
October Feeder Cattle broke out of its consolidation range and traded to a new all-time high and settlement for the lead contract. The high came in at 264.675 and settlement was 264.475. The low was at 261.05. Traders continue to see supply tightness in the feeder market as producers race to buy cattle at ever high prices to put in their feedlots. The index is powering higher and is cash prices are reaching highs in places many thought wouldn’t see higher prices. With feed cost sliding, producers eager to keep building supplies in their yards in my opinion. The breakout in the fats has also helped incentivize aggressive buying in the feeder futures. A failure from settlement could see a test of support at 262.075. A rally past the high has daily pivot resistance at 265.70, 267.00 and then 269.325.
December Live Cattle is now the lead contract as its volume has surpassed the volume of the October contract. With this change comes an explosion in price on the continuous chart. The October contract made all-time highs in its own right and now the December contract has seen a leap in the contract high to 192.00. WOW!! Settlement is also an all-time high at 191.825 and the low is at 190.075. Traders, in my opinion, perceive supply to be extremely tight as contracted animals are likely lower as packers have cut back on slaughter and can’t break price. Weights are starting to rise as heat worries lessen and feed costs are less bothersome for feedlots. This hasn’t helped packers and probably has helped producers with their grading results. Trade has once again been light and to acquire cattle packers will probably pay a little more to finish up the week as futures didn’t break down as they hoped. Many are now projecting price to reach 200 sooner rather than later. We’ll see! A rally past the Friday high could see price test pivot resistance at 192.525, 193.225 and 194.45. A breakdown from the low could see pivot support tested at 189.375 and 188.675.
Boxed beef cutouts were lower as choice cutouts decreased 0.66 to 305.71 and select fell 3.74 to 283.12. The choice/ select spread widened and is at 22.59 and the load count was 156.
Friday’s estimated slaughter is 121,000, which is below last week’s 125,000 and above last year’s 118,000. Saturday slaughter is expected to be 9,000, which is below last week’s 51,000 and last year’s 45,000. The estimated total for the week (so far) is 632,000, which is above last week’s 559,000 and below last year’s 673,000.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been slow on light demand. Compared to last week live FOB purchases traded 2.00-3.00 higher from 182.00-183.00 on a light test. In Kansas negotiated cash trade has been slow on light to moderate demand. Compared to last week live FOB purchases traded 2.00-3.00 higher from 182.00-183.00. In Nebraska negotiated cash trade has been slow on light demand. Compared to last week live FOB purchases traded steady to 1.00 higher from 184.00-185.00. With a few dressed delivered purchases at 292.00 last week dressed delivered purchases traded at 290.00. In the Western Cornbelt negotiated cash trade was slow on light to moderate demand. Compared to Thursday live FOB purchases traded steady at 185.00. With a few dressed delivered purchases at 292.00 last week dressed delivered purchases traded from 288.00-290.00.
The USDA is indicating cash trades for live cattle from 180.00 – 186.00 and from 286.00 – 292.00 on a dressed basis (so far).
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, September 21, 2023, at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
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Walsh Trading, Inc.
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